Multiunit Residential Work a Profitable Niche for Years to Come

If it wasn’t for the boom in apartment construction in the decades following World War II, there might not be an S&M Heating and Air Conditioning.

Company President Jeff Laski says that kind of work is what long sustained the company that his father and uncle co-founded in 1961, and it remains a major part of the Southfield, Michigan-based contractor’s portfolio. “It’s really what made our company what it is today,” Laski says.

The multifamily rental housing market in the U.S. is vast, with an estimated 14.6 million apartment buildings that contain at least five units per structure, according to Los Angeles-based real estate services firm CBRE. Industry clearinghouse, the National Multifamily Housing Council, says 36 percent of American households are currently occupied by renters, and it predicts that an additional 4.6 million apartments will need to be built by 2030 to meet expected demand.

That means HVAC installation and service work in this sector is healthy and it’s expected to be strong for years to come as long as the economy remains stable.

For SMACNA contractors such as S&M that do service or installation jobs on residential multiunit buildings, the projects offer reliable revenue and steady work for employees. Laski estimates that his company has installed HVAC systems in 25,000 to 30,000 apartments in southeastern Michigan over the last 57 years. “That was really how the company established itself,” Laski says.

His father, Sam, quickly saw potential in the low- and high-rise public housing projects that were springing up in Detroit in the 1960s and other apartment complexes under construction throughout the region.

“He just started going after them,” Laski says. “Even though he had a crew that was doing houses, apartments were his forte.”

S&M Heating became a preferred HVAC contractor with Detroit city officials, and Laski estimates that for the next 30 years, the company worked on 1,000 to 1,500 apartments in the Motor City annually.

“The city of Detroit was probably over half of the work that we did,” Laski adds. “It just kept flowing. I think we had maybe 40 to 50 guys doing nothing but apartment units.”
Work ranged from rough-in HVAC to through-the-wall furnaces and split systems. S&M also did makeup air and ventilation projects in downtown high-rise buildings. “We probably got a good percentage of (those types) of projects, just because they knew we could handle it,” Laski says.

Today, multiunit residential remains a major part of S&M’s portfolio, with employees performing HVAC work in 300 to 400 units a year. One service contract is with the corporate owner of a large apartment complex that even has its own maintenance department. But the corporate owners prefer to let S&M handle any HVAC issues that arise. “They don’t rely upon their service guys to touch anything,” Laski says. “I think they just like us.”

The nature of the work has changed from the days when Laski’s father and uncle ran the business, however. What used to be simply going in and performing an installation now involves testing for air leakage and carbon monoxide, and ensuring local construction codes are followed.

“Every municipality follows different codes,” he says. A positive side effect is that the typical cost of an apartment contract has increased from $2,500 per unit years ago to $7,500 today.

At Keystone Heating and Air Conditioning Company Inc. in Racine, Wisconsin, it’s not apartments but condominiums and single-family rental properties where company President David Katt says he’s found success. The key is to create a relationship with landlords and property managers, he says.

“Anytime I can talk to a condo manager, I’m happy to do it,” Katt says. He uses such opportunities to create special group discounts to encourage multiple owners to hire his company for service work or maintenance contracts. A letter from the condo property manager that mentions his company carries more weight than an unsolicited flier. “It works for my service guys,” he says.

Among Keystone’s current clients are the owners of a multiunit condominium property with HVAC equipment that dates to 1972. Due to the building’s design, replacing the 46-year-old systems is not an option, Katt says, but the old equipment is prone to break down. That’s where Keystone comes in. The regular maintenance work is profitable, he says.